Fee Sharing Model

Definition ∞ A fee sharing model outlines how transaction fees or protocol revenue generated within a decentralized application or blockchain network are distributed among various stakeholders. This often includes validators, liquidity providers, developers, or token holders. The specific distribution mechanism is typically codified in the protocol’s smart contracts and can incentivize participation, secure the network, or fund further development. It represents a key economic component of many digital asset systems.
Context ∞ Fee sharing models are a regular subject in cryptocurrency news, particularly concerning governance proposals, tokenomics updates, and the economic sustainability of decentralized protocols. Discussions often center on balancing incentives for different participant groups and ensuring long-term protocol viability. Changes to these models can significantly impact a project’s valuation and community engagement.